The State Bank affirms no impact, HoREA says regulations are unclear regarding the formation of mortgage homes in the future.
According to Circular 22/2023/TT-NHNN amending and supplementing Circular 41/2016/TT-NHNN on capital adequacy ratio of commercial banks (NHTM), state bank branches (NHNN) clearly states: Article 10, Clause 2 of Circular 41/2016/TT-NHNN states: “The mortgage loan is a loan for individuals, organizations to buy real estate, implement real estate projects, and is secured by real estate, real estate projects guaranteed by transactions according to the provisions of the law on secured transactions.”
The State Bank confirms that the application of Circular 22 to organizations and individuals who intend to buy and secure (mortgage) homes to be formed in the future will apply risk ratios from 30-120% depending on the loan-to-value ratio (LTV) calculated as a percentage of the loan amount to the value of the collateralized asset. In the absence of LTV information, the default risk ratio is 150%.
Circular 22 not only limits the impact on the banking sector but also sets detailed regulations on determining and applying risk ratios to each type of asset, including mortgage and collateralized home loans.
According to the State Bank, an important point of Circular 22 is not to amend, supplement the content of Circular 41/2016/TT-NHNN, but to clarify and expand the provisions relating to buying and mortgaging future homes.
Under the new regulation, the independent valuation of homes formed from mortgaged loans is conducted based on the principle of fairness, not higher than the market price at the time of loan approval. This ensures transparency and fairness in the process of determining the value of collateralized assets.
The condition that homes have been completed under a home purchase contract only applies to secured home loans and in the case of construction, the formation of future homes is applied according to the provisions of Circular 41/2016/TT-NHNN. The corresponding risk ratios apply from 30% to 120%, depending on the LTV ratio and debt service coverage ratio (DSC).
HoREA believes that Circular 22 needs to be amended before it takes effect
Regarding the new regulations in Circular 22, the Ho Chi Minh City Real Estate Association (HoREA) raises the “legal obstacles” of Circular 22/2023/TT-NHNN (amending and supplementing a number of provisions of Circular 41/2016/TT-NHNN).
